Key Highlights
- US imposed sanctions on Russia’s largest oil producers Rosneft and Lukoil on October 22, 2025
- Reliance Industries could face revenue decline of ₹3,000-3,500 crore due to supply disruptions
- Russian crude accounts for 34% of India’s total oil imports, with Rosneft and Lukoil supplying 60% of that
- Companies have until November 21, 2025 to complete pre-existing contracts before sanctions take full effect
- Reliance’s refining costs expected to increase by 12% as it rebalances away from Russian crude
- Nayara Energy faces acute challenges as Rosneft holds nearly 50% stake in the company
- Global oil prices surged 5-6% immediately following the sanctions announcement
- State-owned Indian refiners IOC, BPCL, and HPCL also face significant margin pressure
New Delhi: The United States Department of the Treasury imposed comprehensive blocking sanctions on Russia’s two largest oil exporters, Rosneft and Lukoil, on October 22, 2025, marking the first major sanctions against Russia by President Donald Trump’s second administration. The sanctions were announced after Trump cancelled a planned summit with Russian President Vladimir Putin in Budapest, citing a lack of progress toward ending the Ukraine war.
US Treasury Secretary Scott Bessent emphasized that the measures target companies that help “fund the Kremlin’s war machine,” with the sanctions designed to cut crucial oil revenue streams that finance Russia’s military operations. Unlike previous sectoral sanctions under Executive Order 13662, these comprehensive blocking sanctions freeze all U.S. assets of Rosneft and Lukoil and prohibit American entities from conducting any business with these companies or their more than 30 designated subsidiaries.
Major Blow to Reliance Industries and Indian Refiners
The sanctions pose a significant financial challenge for India’s refining sector, with Reliance Industries Limited expected to bear the heaviest impact. Russian crude oil constitutes 20-25% of Reliance’s oil-to-chemicals portfolio, and the company maintains a long-term agreement with Rosneft to purchase 500,000 barrels of crude oil daily. Analysts estimate that Reliance’s revenue from its oil-to-chemicals business, currently at ₹15,008 crore, could decline to approximately ₹12,000 crore, representing a loss of ₹3,000-3,500 crore.
The sanctions directly threaten Reliance’s cost competitiveness, with refining costs projected to increase by 12% as the company scrambles to source alternative crude supplies from the Middle East and other regions. Following the announcement, Reliance stated that it is actively rebalancing its Russian oil import portfolio and will remain fully compliant with government guidelines and international regulations.
State-Owned Refiners Face Margin Squeeze
India’s state-owned oil companies, Indian Oil Corporation (IOC), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL) also confront substantial challenges. According to a senior IOC official, Russian crude accounts for 15-18% of the company’s total crude oil basket. While these companies lack long-term contracts with Russian suppliers, they have been consistent purchasers of discounted Russian crude since the Ukraine conflict began in 2022.
Energy analysts warn that if 30% of Russian supply is disrupted and even a $2-3 per barrel discount is lost, the impact on total earnings for state refiners could be severe. Even a modest $1 per barrel price increase could reduce their total earnings by 9-10%, significantly pressuring their refining and marketing margins at a time when downstream profitability remains weak.
Nayara Energy Faces Existential Challenge
Nayara Energy, in which Rosneft holds a nearly 50% equity stake, confronts the most acute challenges among Indian refiners. The company’s Vadinar refinery in Gujarat has already been operating at a reduced capacity of 60-70% following the first phase of US sanctions imposed in July 2025. With comprehensive sanctions now in place, Nayara Energy will struggle to secure crude oil supplies and market its refined products, potentially forcing further capacity reductions or operational restructuring.
The ownership structure creates additional complications, as entities owned 50% or more by sanctioned companies are automatically blocked under US regulations. This puts Nayara Energy’s international banking relationships and trade financing arrangements at significant risk.
November 21 Deadline and Transition Period
The US Treasury has provided importing companies with a limited grace period, allowing them to fulfill shipments under pre-arranged contracts until November 21, 2025. After this date, any barrels from Rosneft and Lukoil will be considered restricted, and companies continuing to trade with these entities risk secondary sanctions on their financial institutions.
This represents a critical difference from previous sanctions, which imposed sectoral restrictions rather than comprehensive blocking measures. The new sanctions carry the explicit threat of secondary penalties on foreign financial institutions that continue doing business with the sanctioned companies, creating powerful incentives for Indian refiners to immediately seek alternative suppliers.
India’s Russian Oil Dependency
Since Russia invaded Ukraine in February 2022 and the G7’s imposition of a $60 per barrel price cap on Russian crude, India has dramatically increased its purchases of discounted Russian oil. This year, Russian crude has accounted for 34% of India’s total oil imports, with Rosneft and Lukoil together supplying approximately 60% of those Russian barrels. Historically, India sourced most of its crude from Middle Eastern suppliers, but Russia’s heavily discounted prices made it an attractive alternative for cost-conscious Indian refiners.
Market Impact and Alternative Supplies
Global oil prices surged approximately 5-6% immediately following the sanctions announcement, with US crude futures rising to $60 per barrel and approaching five-month highs. However, analysts suggest the oil market faces a potential surplus in 2026, which could moderate price increases and provide some relief to Indian refiners.
Energy experts note that OPEC countries possess excess crude oil production capacity that could partially offset supply disruptions, though at higher prices than the discounted Russian barrels. The sanctions are expected to force Russia to sell its remaining exportable oil at even steeper discounts to willing buyers while reducing Moscow’s overall oil revenues, the primary US policy objective.
The transition away from Russian crude will require Indian refiners to recalibrate their supply chains, renegotiate contracts with Middle Eastern producers, and absorb higher procurement costs that will ultimately pressure their profitability margins in an already challenging refining environment.
